JJJ Corp. has $10 million in assets and is currently financed with 100 percent equity. The firm decides to switch to a 60 percent equity/40 percent debt structure and decides to sell $4 million of debt and use the proceeds to retire $4 million in equity today. This is an example of:

Question

Quizplus · Accepted Answer

This is an example of active capital structure management because JJJ Corp. is actively changing its capital structure by altering the proportion of debt and equity financing.

JJJ Corp Has $10 Million in Assets and Is Currently Financed